Onsale Reports Record Revenue for Second Quarter; Sales Increase 20% on 30% Reduction in Inventory - Company Financial Information

Edge: Work-Group Computing Report, August 2, 1999

Onsale, Inc. (Nasdaq:ONSL), a leading Internet retailer, has announced financial results for the second quarter ended June 30, 1999.

Revenue for the quarter was $81.4 million, a 20 percent increase over revenue of $67.8 million for the first quarter ended March 31, 1999, and a 60 percent increase over revenue of $50.8 million in the comparable period a year ago. Gross merchandise sales for the quarter were $86.9 million, a 19 percent increase compared to $73.3 million in the first quarter of 1999, and a 48 percent increase compared to $58.6 million in the second quarter of 1998.

Net loss for the quarter was $11.8 million, or $0.60 per share on 19.6 million weighted average shares outstanding (both basic and diluted). This compares to a net loss of $5.5 million, or $0.28 per share on 19.4 million weighted average shares outstanding (both basic and diluted) in the previous quarter, and a net loss of $4.0 million or $0.21 per share on 18.8 million weighted average shares outstanding (both basic and diluted) in the comparable period a year ago. Ending inventory for the quarter was $7.3 million compared to $10.4 million for the previous quarter.

         Condensed Consolidated Statement of Operations
         (in millions of dollars, except per share data)

                           (unaudited)

                           Three Months           Six Months
                          Ended June 30,         Ended June 30,
                          1999      1998         1999       1998

Total revenue             81.4      50.8         149.2      91.0
Gross merchandise sales   86.9      58.6         160.1     108.8
Gross profit               2.4       6.0           8.5      10.5
Total operating expenses  14.4      10.7          26.6      20.2
Loss from operations     (12.0)     (4.8)        (18.1)     (9.7)
Net loss                 (11.8)     (4.0)        (17.4)     (8.2)
Loss per share           (0.60)    (0.21)        (0.89)    (0.44)

Diluted weighted average
 common shares used in
 per share calculations   19.6      18.8          19.6      18.8

"We accomplished our top priorities for the second quarter - grow sales and grow our customer base," said Jerry Kaplan, Onsale's president and chief executive officer. "Our aggressive marketing initiatives and promotions increased revenues 20 percent, and the number of people registered to bid and buy rose 22 percent to 1.382 million compared to 1.137 million in Q1. Despite this growth, 74 percent of our orders went to repeat buyers, up from 73 percent in the previous quarter.

"With the continued expansion of the Onsale atCost site, which now represents almost 30 percent of our sales, we are much more of a 'virtual' company because we do not take inventory risk, nor do we physically handle these goods. We now take inventory risk on less than half (45 percent) of the goods that we sell, and the percentage of goods that we physically handle dropped to 49 percent in the second quarter from 54 percent in the first quarter. This led to a 30 percent reduction in ending inventory and an increase in inventory turns to 36 times for the quarter versus 23 times in the previous quarter. Annualized revenue per employee rose to $1.43 million from $1.34 million in the first quarter.

"Our momentum continued with last week's announcement of a merger agreement with Egghead.com. This enables us to create a market leader in online retailing of technology products, which is the largest category on the Internet. It also lets us realize significant benefits of increased size and scale, and merge our complementary customer bases. Our goal is to combine each company's respective strengths to become a major shopping portal in technology and related categories.

"Our plan going forward is to build a single brand under the Egghead name, increase sales by leveraging Egghead's traffic with Onsale's high visitor-to-customer conversion rates, reduce costs by eliminating duplication, and expand into related businesses." Achievements and Awards

During the quarter, Onsale was issued a patent entitled Method And System For Processing And Transmitting Electronic Auction Information. The patent discloses a fundamental system for conducting multi-person, interactive auctions over the Internet.

In April, Gomez Advisors, Inc. ranked Onsale the number one auction site for "serious shoppers." The company also took top honors in the ease-of-use category, and was ranked second in the overall ranking of fifteen online auction sites included in the survey.

In May, Onsale was ranked the second fastest growing public company in the Bay Area by the San Francisco Business Times. Onsale was also ranked as one of the fastest growing public companies in Silicon Valley by the San Jose Business Journal.

In June, Onsale Japan K.K. announced the launch of online business-to-consumer auction services in Japan. Onsale also announced its eleven-millionth bid. Marketing/Merchandising Partnerships

Onsale teamed up with computershopper.com and Quicken.com to provide live auction feeds to their respective web sites.